A sovereign state in free association with the United States (Compact of Free Association).
Palau, a sovereign state in free association with the United States under the Compact of Free Association, taxes PGST-registered businesses under a 12% Business Profit Tax (BPT) on net income, effective January 1, 2023, replacing the prior 4% Gross Revenue Tax; businesses with under USD 50,000 in annual gross income are exempt from GRT/BPT but instead pay a business license fee, administered by Palau's Bureau of Revenue and Taxation.
A specific statutory tax year-end and corporate filing deadline is not confirmed in available primary sources; confirm current filing deadlines directly with Palau's Bureau of Revenue and Taxation before relying on this page.
12% Business Profit Tax (BPT) on net income for PGST-registered businesses (effective 1 January 2023, replacing the prior 4% Gross Revenue Tax); businesses under USD 50,000 annual gross income are exempt from GRT/BPT but pay a business license fee instead.
Progressive wage tax: 6% on the first USD 8,000 of gross wages, 12% above that, with no tax-free threshold.
10% Palau Goods and Services Tax (PGST).
Individual tax residency requires at least 183 days of physical presence in Palau during a calendar year (each day counted, including fragmented stays). Below that threshold, an individual is generally treated as a non-resident and taxed only on Palau-source income. Sources flag some ambiguity in the underlying texts between a purely territorial model and elements of worldwide taxation for residents - confirm the precise scope directly with Palau's Bureau of Revenue and Taxation for any specific fact pattern rather than assuming a single clean rule.
A foreign company operating through a permanent establishment or fixed place of business in Palau is brought within the 12% Business Profit Tax framework on Palau-source income attributable to that presence, consistent with the general 183-day individual residency threshold and territorial elements described elsewhere on this page; a codified PE test comparable to a full OECD Model treaty article is not confirmed in available primary sources, given Palau's minimal treaty network.
No Controlled Foreign Company regime was identified in available sources for Palau. Palau residents and citizens of countries with their own CFC rules (including the United States) remain subject to their home country's CFC attribution rules regardless of Palau's own lack of a regime.
No statutory thin capitalization or interest-limitation rule was identified in available sources.
Palau classifies entities under its own domestic tax legislation rather than offering an elective check-the-box system, and no ATAD2-style anti-hybrid mismatch regime addressing double-deduction or deduction-without-inclusion outcomes has been identified, consistent with Palau having no Controlled Foreign Company regime; Palau residents and citizens of countries with their own CFC rules (including the United States, given the Compact of Free Association relationship) remain independently subject to their home country's CFC attribution rules regardless of Palau's own lack of a regime.
No domestic FBAR-equivalent regime requires Palau residents to separately disclose foreign financial accounts, and Palau is not currently a CRS participating jurisdiction, so it does not automatically exchange financial account information with foreign tax authorities under the OECD's Common Reporting Standard. US persons remain independently subject to FinCEN Form 114 (FBAR) and potentially Form 8938 regardless of Palau's own rules.
A dedicated participation exemption regime for dividends or capital gains from a qualifying subsidiary is not confirmed in available primary sources; confirm current treatment of intercompany dividends and share disposals directly with Palau's Bureau of Revenue and Taxation before relying on this page.
A dedicated unilateral foreign tax credit mechanism is not confirmed in available primary sources; given Palau's minimal or nonexistent double tax agreement network, relief from double taxation for Palau residents with foreign-source income should not be assumed available through a treaty network.
Palau does not maintain an extensive network of double taxation treaties, per available sources, including a direct check for a Palau Bureau of Revenue and Taxation treaty list, which did not surface one. Given Palau's Compact of Free Association relationship with the United States and its small, US-dollar-based economy, a minimal or nonexistent DTA network is the most consistent reading available, though this is an inference rather than a primary-source-confirmed count.